Economics Homework Help

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Suppose Sweden, a small open economy, has 20 TV producers, 1 cellphone producer, and no car producers domestically. Cars are imported from Germany, whose producers exert market power on the Swedish car market.

The Prime Minister declares that the country will impose tariffs on imports of TVs and cars from abroad, but will not impose any tariffs on cellphones. She claims each of these decisions will result in an increase in welfare. For each market (i.e., TVs, cellphones, and cars), evaluate the Prime Minister’s claim that the government’s decision will raise welfare. Explain.